About the only thing that we pundits can say with any certainty about 1997 is that there is going to be a general election. Even that, I suppose, remains a prediction that is conditional on there not being a military coup between now and May.
All the dreary economic and industrial forecasting of the past couple of weeks doesn’t amount to a hill of beans – far less a row of backbenchers with sizeable majorities – because this year is, if anything, all too predictable. If there were an opposition promising super tax rates for high earners, renationalisation of the means of production and a return to currency controls, then there would be some mileage in a game of “what if…?”
As it is, our short-term political prospects – and consequently the economic climate – are prescribed by questions of stewardship, rather than policy. As matters stand, we are to be asked at the forthcoming general election to decide in whose hands the economy is more likely to flourish, not to decide between two distinct economic policies. I imagine that this is why the City is relatively relaxed about the prospect of a Labour government.
I would only draw some attention to a couple of lessons that British business can learn from the way that the Government and some blue-chip businesses are behaving at the start of a first quarter of 1997 that promises much such pre-election posturing.
The first relates to the parable for our marketing times that John Major has unwittingly provided. He should note that, according to a survey just published by the Economic Intelligence Unit (EIU), marketing has just overtaken finance as the business discipline perceived by high-flyers as most likely to take them to the top. That would seem to suggest that, in the world of Tory politics, you are better placed in Dr Brian Mawhinney’s chair than at the Treasury (whence came John Major).
The Conservative Party has long argued that there is nothing wrong with its policies, but that the communication of its success has been the problem. If, as Canadian sociologist Marshall McLuhan had it, the medium is really the message, then the Prime Minister has chosen the wrong career path. Just look at the last three catch-phrases that he has provided by way of exhorting the electorate to “buy” Conservative: “Family values”, “wait and see” and “back to basics”.
Hardly inspirational, but the parable for business must be that, whatever the inherent quality of the product or service, it will be as nought if it is ill-packaged at the point of delivery. Imagine, then, how important are packaging and distribution if your product or service is anything less than tip-top. No amount of advertising that claims that your rival’s product is even worse is likely to save you.
Still, Major can draw some comfort from a separate finding in the EIU’s report, namely that there will be a trend away from charismatic leadership, towards teams and consensus in boardrooms. I have to say that I rather doubt this element of the EIU’s research. The bland and grey early Nineties followed the bright lights of the Eighties – I think there is a fashion for companies to talk down the value of strong leadership. I also think that this fashion will disappear in industry when firmer and brighter leaders emerge in politics.
But enough of political analogies for the business world. There are also some intriguing pre-election indications emerging into how some of our blue-chips view the prospect of a change of government. One of these insights is provided by the spectacle of major British companies wishing to bale out of Government imposed limits on foreign ownership.
British Aerospace and Rolls-Royce have both let it be known that they would like to see the 29.5 per cent ceilings on foreign ownership of their shares abolished. The move by Rolls-Royce is particularly interesting, since only four years ago the company managed to elicit agreement from the Government to raise the ceiling to 49.5 per cent, only to have the move blocked by European competition authorities.
The change of heart is doubtless driven by a shift in the geographical balance of Rolls’ business, particularly to the States, where a listing on the New York Stock Exchange may prove attractive to foreign investors. Likewise, BAe may wish to swap equity with a European partner, such as Daimler-Benz, if the limit is removed.
Meanwhile, the National Audit Office (NAO) is investigating the sale of train-leasing concern Porterbrook for a 300m profit just months after it was sold by the Government to its management. The NAO has previously criticised the sale of Rover to BMW for some 800m, after the Government, in the masterly shape of Lord Young, sold it to BAe for 150m, and the sale of Royal Ordnance to BAe for 190m.
Many privatised companies enjoyed protective “golden shares” and foreign-ownership ceilings. That such companies now want foreign-ownership limits relinquished says two things. Firstly, they may be concerned about what a Labour government might do about state assets sold at bargain-basement prices. And, secondly, it demonstrates that European and international economic policy isn’t driven by politicians – as they would like to believe – but by industry. The likes of BAe look far from Eurosceptic.